At every down cycle of the IC market, talks about the potential sale of IBM’s semiconductor business have come up. In recent years, the speculation has intensified, identifying Globalfoundries as the potential buyer.

So, what’s different this time around? Is it finally happening?

Here are some factors contributing to the impetus behind the talk.

First, IBM’s transformation from hardware supplier to software/service company is almost complete. IBM announced the sale of its low-end server business to Lenovo for $2.3 billion last month.

Second, of IBM’s declining hardware business -- what’s left of it, the microelectronics group is the biggest loser. In the latest quarter, its revenue was down by 33%.

Third, it’s been two years since Virginia Rometty took the helm at Big Blue. It’s time for her to prove that she can make tough choices that her predecessors couldn’t.

During the latest earnings call, Rometty noted, “Looking ahead, we continue to invest to deliver innovations for the enterprise in key areas such as big data, mobile solutions, social business and security, while expanding into new markets and reaching new clients.” It’s not clear how IBM’s semiconductor business could possibly fit into the big picture she painted in her statement.

Before diving into the speculation, here are some basic facts we all need to know.

IBM still makes chips at East Fishkill, New York.

However, IBM does not sell chips on the open market.

IBM is big on semiconductor R&D, with stellar records. The company’s contributions to the chip industry include a host of manufacturing processes and innovations include Silicon-germanium (SiGe) and Silicon on Insulator (SOI).

IBM innovated, more than a decade ago, a new model of sharing R&D costs to develop chip technology. Called “the Common Platform,” the alliance consists of IBM, Samsung and Globalfoundries.

The Common Platform is moving forward. The latest focus by the Common Platform is on the development of the 14nm bulk node which will introduce FinFET technology. Its mission is to offer the next generation of process scaling with low voltage operation, according to the alliance.

IBM has played well with public authorities and shown its industry leadership skills when it helped the state of New York revitalize the upstate New York area to create a semiconductor R&D hub. In the fall of 2011, the company promised to contribute $3.6 billion to the total of $4.4 billion five-year project, all dedicated to the future of chip making.

IBM chip business is keeping an eye on the emerging market. IBM is involved in one of the upcoming foundry projects in India, partnering with Israel’s Tower Jazz and India’s Jaiprakash Associates.

Nobody disputes an exemplary leadership role IBM has played in the global semiconductor industry. Even though the company continued to hack away at its workforce in its chip business, IBM, especially in its R&D activities, still commands respect and awe.

A big unanswered question, however, is what, then, IBM gets in return for all that money it is spending for research in manufacturing processes, extreme ultraviolet lithography, and other advanced technologies. Assuming there is an ample evidence for fruits of the company’s semiconductor R&D efforts, the next question is what plans IBM has to leverage it in its future business.

These are the questions Rometty needs to ask. If there are strong reasons to keep IBM Microelectronics division, she needs to be convinced of it.

As for a potential buyer of IBM’s chip business, it’s questionable if anyone would be happy to acquire IBM’s fabs alone, sans access to IBM’s semiconductor R&D team and IPs.

Certainly, if a buyer of IBM’s chip division were to be Globalfoundries, already a partner with IBM in the Common Platform alliance, the Abu Dhabi-owned foundry is surely aware of the value of IBM researchers and patents – beyond IBM’s 300-mm wafer fab at East Fishkill.

As our former EE Times’ colleague Peter Clarke once wrote, besides price, there are two factors that could kill a deal between IBM and any entity outside the United States (such as Globalfoundries). They are US national security and national pride.

You may call these two factors more of an emotional issue than anything else. But precisely because of that, it's hard to attach any value to the potential deal.

Google might be buy IBM fabs...they tried with Freescale and failed (but retained patents), they might try again...at some point they might need more business than search adevrstising that generates 90% of their revenue

@visi_guy: What about Germany, they buck the trend and don't seem to be hurting?

It's not quite that simple. The products that Germany succsssfully exports are higher-end luxury items which can command a price and margins that will support a manufacturing economy in a nation with Western wage scales.

But these things are structural, and Germany is hurting in some places. Technology is making an increasing number of jobs redundant - what had been done by a human being can now be done by a machine, or by another human somewhere where it's cheaper. A fair number of folks in Germany are victims of technological unemployment, and aren't likely to get other jobs, because the jobs that exist are things they aren't qualified to do, and they may not be able to acquire the needed skills. There's a German economist whose name I've forgetten doing reaearch on the topic, with the underlying question "So what does Germany do for these people?".

Germany is getting away with it so far, but is not guaranteed to continue to be able to.

I think what Google wanted from Freescale was the patents. Google isn't really in the hardware business. There are things with the Google name on them, but Google itself doesn't make them. It gets them from folks who do make hardware in an OEM deal.

at some point they might need more business than search adevrstising that generates 90% of their revenue

If they do, hardware isn't the place to get it. Look at what it costs to build a fab, then look at what it costs to keep a fab updated with the latest process technologies, and last look at what you can make selling what the fab produces. There's a reason why the number of companies that actually own fabs is shrinking.

@DMCCunney...there are rumours that Google is getting into chip design...you would think they go fabless first...but who knows, maybe they can swallow some fabs too, I agree this is expensive and somewhat divergent to other things they are doing...but they are also getting into robotics big time, self-driving cars etc...sounds like hardware to me

Sounds like proof-of-concept prototypes to me. Google needs self-driving cars so that people stuck in traffic can surf the Internet and generate advert revenue for Google. I can't see them caring who makes the cars, as long as someone makes them. But someone has to prove the concept first, and Google has plenty of cash for R&D.